Dusting the cobwebs on that “old” estate plan

Estate plan aren’t created to be current throughout your lifetime. When drafted, they are based on the current climate of the estate tax laws and your own circumstances, with some flexibility built in. The changing legislative, economic and social times can have more of an effect on your existing estate plan than you think. This is why, if you do not already do so, you should “dust the cobwebs off that plan” and have it reviewed for continued applicability and effectiveness. Now, I am not suggesting that you pay an attorney a few hundred dollars every year to have your plan checked. Below is a non-exhaustive list of when you should bring out that dusty plan:

After or in contemplation of major life changes such as divorce, marriage, remarriage, birth of a child. Ensure that the correct beneficiaries are inheriting your property. Avoid undesirable consequences such as your ex-spouse inheriting your estate; a child being omitted from inheriting from your estate or your new husband inheriting all your assets to the exclusion of your children from a prior marriage or vice versa.

Economic downturn or upswing. Changes that affect the value of your estate significantly could produce disastrous results without appropriate planning. Your surviving spouse might be left with less available funds than you would like because your estate plan includes an A/B trust split at the 1st to die and your estate is not significant enough to handle the split. OR. You can incur a massive estate tax because your estate ends up being worth more than the exemption amount and your estate plan does not have sufficient tax planning.

Changes in the estate and gift tax laws. The estate and gift tax arena is ever-changing and therefore lacks predictability. Estate plans cannot be created to fully contemplate those changes. The most recent example of this unpredictability came at the end of last year when certain aspects of the estate and gift tax were to revert back to what it was prior to 2001. Instead, in late Dec of 2010, Congress changed the laws by increasing the amounts of the estate, gift and generation skipping exemptions, lowering the effective tax rate to 35%, giving portability of unused exemption amounts to spouses (this didn’t even exist prior to 2001) and giving people dying in 2010 the choice of basis rules they’d like to have apply at the time of death. (These rules are too complicated to be fully discussed here. See my “Update to Estate and Gift Tax” post for an explanation of some of these changes ). The best or worst part of all this is that this current rule change is a temporary fix until the end of 2012. 2013 is supposed to see the estate tax revert back to its pre-2001 state.

You or a family member is contemplating the need for nursing home or assisted living care. You, your spouse or your parent is nearing the age where they might need to be placed in the nursing home and Medicaid and/or MediCal might be needed. Contacting an elder law attorney to review your current plan early enough can help you qualify for the services you or your family member need instead of spending all your life savings and living nothing but debt for your family.

There are more circumstances that may present themselves which will require you to get your estate plan updated or reviewed. Don’t sit on it. Call your estate planning attorney. Make sure that your plan still disposes of your property in the manner you desire and that you will not incur any unwanted tax consequences.

You’ve gone this far in planning. The next, but very important step is to now make sure that your plan still works for you.

I am an estate planning attorney at the Law Office of Jan Alcide. If you are an Orange County resident and have any questions, please feel free to give me a call at 949-607-9412. The Law Office of Jan Alcide will be more than happy to help with your estate planning needs. We offer a no-obligation free consultation. We are conveniently located in Downtown Dana Point at the corner of Violet Lantern and Del Prado.